Stamp Duty Threshold Distorts Housing Market
Bank of England mortgage data shows that stamp duty changes may have caused a ‘bunching’ of house sales in December.
The gross lending total of £13.4 bn in December 2009 was in line with the Council of Mortgage Lender’s (CML) estimate (£13.5 bn) and seems to confirm what many in the housing industry believed was that a number of house sales were ’rushed through’ to beat the stamp duty deadline.
Net lending remains up from the near stagnation in the middle of 2009. For 2009 as a whole net lending totalled £11.5 bn.
This was the lowest level on record, but higher than the CML forecast of £8bn. It was largely driven by the relative strength of house purchase activity, which picked up over the latter part of the year, and weak levels of repayments.
There is little, if any evidence that households are using lowing interest rates to pay-off mortgage debt more quickly.
“These figures confirm that the mortgage market ended 2009 in much better shape than it started, but it still looks like a slow haul back to meaningful levels of activity,” said CML economist Paul Samter.
“It should be no surprise if January and February this year appear particularly slow, if we are correct in our view that many buyers rushed to beat the stamp duty concession deadline in December.’
Gross lending by building societies was up 15% in December, 2009, compared to November figures. Gross lending for 2009 totalled £18.6 billion compared to £37.5 billion in 2008.
Paul Broadhead, Building Societies Association (BSA) Head of Mortgage Policy believes that the re-introduction of the stamp duty threshold was the reason for the increase in December, pointing out that lending remained down overall in 2009 compared to 2008.
“Despite this rise, total gross lending in 2009 was only half of that in 2008 and it is likely to remain at low levels until funding conditions improve,” he said.
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